Firm Spent $12,000 on Water District Workers : Agency: 2 Santa Margarita engineers were entertained by prime contractor awarded millions of dollars in jobs.

By MARK PLATTE

Jan. 31, 1994 12 AM PT

TIMES STAFF WRITER

MISSION VIEJO — An engineering firm that was awarded millions of dollars worth of contracts by the Santa Margarita Water District spent nearly $12,000 entertaining the district’s top engineer and his chief assistant between 1989 and 1992, The Times has learned.

Bill Dye, the district’s top engineer since 1979, and Dan Ferons, his chief assistant, were reportedly treated to hundreds of meals and at least two hotel stays in resort towns by the Irvine-based engineering firm of Robert Bein, William Frost & Associates, which was awarded nearly $14 million in no-bid contracts over the past five years, more than any other engineering firm doing district work.

Dye, 58, has never reported receiving anything of value from any contractor on the statements of economic interest he has been required to file every year under state conflict-of-interest laws.

Ferons, 34, who sometimes functions as the district’s chief engineer in Dye’s absence, thus far has not been required to file statements of economic interest. But because he is second in charge in the engineering department, the district’s board of directors is deciding whether he should have to file such statements in the future.

Until the district designates him as one of the officials who must file, Ferons can accept gifts of any value and is not required to report them.

The state’s Political Reform Act makes it illegal for certain designated officials who receive gifts worth more than $250 in any one year to use their influence to steer any business to the gift-giver in the succeeding 12 months. Bein-Frost’s spending on Dye surpassed that amount in each of the four years.

In his capacity as chief engineer, and as a member of the district’s engineering committee, Dye has made hundreds of recommendations to the board of directors for all district engineering work, including that of Bein-Frost.

Altogether, Dye was treated to meals and other gifts valued at more than $5,000 between the beginning of 1989 and the close of 1992, while Ferons was the beneficiary of gifts totaling more than $6,000 during the same period.

Dye did not return calls for comment, nor did Robert Kallenbaugh, the president of Bein-Frost. Ferons directed inquiries to the district’s new general manager, John J. Schatz, who said he had not had time to investigate the allegations.

Bein-Frost has worked as a consulting engineer to the district since 1970, primarily for planning purposes and to perform engineering work on the district’s water distribution system.

The volume of gifts raises questions about the relationship between the district’s top two engineers and the district’s chief engineering firm. Although the district has decided to curtail spending on the services provided by Bein-Frost and other outside consultants, the company was awarded nearly $12 million in contracts during the time it treated Dye and Ferons to nearly $12,000 in gifts.

Bein-Frost’s gift-giving is well documented. Former general manager Walter W. (Bill) Knitz reported receiving $8,230 in gifts from the firm between 1989 and 1993, including trips to Cabo San Lucas, meals, golf games and air show tickets. Michael P. Lord, the former assistant general manager, reported receiving $14,646 in gifts from the company, including pheasant hunting and fishing trips, golf games and assorted meals.

Both men resigned after The Times disclosed their excessive spending of district funds and the volume of gifts they had received from contractors who benefited from district work.

Knitz and Lord are the targets of a criminal investigation being conducted jointly by the district attorney’s office and the FBI, which are examining possible violations of state conflict of interest laws. The Securities and Exchange Commission is conducting a separate inquiry into the district’s portfolio and Lord’s role in handling its finances.

Earlier this month, longtime board Chairman Don B. Schone resigned on the same day The Times disclosed that he had taken two trips to Cabo San Lucas at Bein-Frost’s expense, but never reported them on his statements of economic interest.

It is unclear whether the criminal investigation involves anyone other than Knitz and Lord. Last April, the district attorney’s office asked the district to hand over the expense accounts of Knitz and Lord, as well as those of Dye, Finance Director Jim Clark, Controller Carol Megara and former Operations Director C.J. DiPietro.

District attorney’s investigators also requested information related to the salaries, benefits and other compensation for Knitz, Lord, Clark, Megara, DiPietro and operations chief Bob Regan.

Wallace J. Wade, assistant district attorney in charge of special operations, would only say that the criminal investigation was continuing and is expected to be completed in the next few weeks.

Dye was hired in April, 1979, as district engineer, and he now commands a 15-member engineering staff and is paid $97,020 a year. Ferons, second in charge, was hired in October, 1985, and now makes $68,591 a year.

As district engineer, Dye is more directly involved with the contracts of Bein-Frost than any other employee.

In an interview last March, Dye explained that he negotiates consulting contracts with engineering firms. Dye said he figures out what work is needed, negotiates a fee with the consultant and then makes a recommendation to the district’s seven-member engineering committee. Dye himself was a member of that committee until last April.

At that time, acting general manager Dan Miller removed staff members from the engineering and finance committees because of potential conflicts of interest.

“I just thought it was inappropriate for staff members to sit on committees,” Miller said last week. “Staff members should make recommendations only. They should not be voting on committees.”

Miller said he saw a conflict of interest in having a staff member analyze a potential contract and then later vote on the contract.

In addition to removing staffers from board committees, Miller also drew up a new procedure for awarding professional services contracts, allowing only the general manager to approve contracts under $10,000, and requiring multiple proposals for contracts above $10,000.

“Before that, there were no thresholds and nothing written,” Miller said. “It was up to the discretion of the staff as to what went to the board and what didn’t go to the board.”

Last summer, following the resignations of Knitz and Lord, Miller authorized a $5,000 seminar to teach all board members and top district employees how to comply with the gift-reporting requirements enforced by the state Fair Political Practices Commission.

According to some who attended the seminar with Dye, the engineer challenged the need for him to even file financial disclosure forms, arguing that state guidelines called for the “district engineer” to file, instead of the “chief engineer,” as he is called.

In a board of directors meeting with staff last May to discuss a draft code of conduct that prohibits district employees from accepting any but nominal gifts, Dye complained that he often attended working lunches and breakfasts with contractors and couldn’t understand why they shouldn’t be expected to pay for lunch.

“He had a concern that maybe he couldn’t conduct a breakfast meeting or lunch meeting and would have to meet with these contractors at some other time that would make his day longer,” Miller said. “We tried to say, ‘No. Continue to hold those meetings, but you have to pay for your own meal.’ ”

Scott Hart, a public relations consultant hired by the district last year, suggested having an attorney conduct the seminar on how to file state financial disclosure forms. He said many staff members didn’t know what was required.

“Overall, there was a real lack of understanding and obviously, it was a shock and surprise as to what was required of them,” he said. “It was more frustration and surprise than anything else.”

Despite the problems that have surfaced in the past year over financial disclosures, Dye has never amended his statements of economic interests to reflect the gifts that Bein-Frost has given him.

Miller praised Dye’s work for the district in the eight months Miller acted as general manager.

“Bill is a very knowledgeable engineer,” Miller said. “He’s a catalogue of historical facts and knowledge about the water distribution and sewer distribution systems.”

Ferons, Miller said, has played a greater role in developing the engineering department and running the day-to-day operations of the district.

“I see him as a chief engineer some day,” Miller said.